New Bill Delays Three Taxes

The president signed a “continuing resolution” on January 22, delaying three health-related taxes: the medical device excise tax, the Cadillac tax and the health insurance tax.

Medical Device TaxJust days before medical device companies were set to make their first payment to the IRS, the excise tax relief was extended another two years. While Congress did not grant permanent relief, the bill amends the Internal Revenue Code to extend for two years (2018 and 2019) the moratorium on the 2.3% excise tax on the sale of medical devices. Under current law, the moratorium expired at the end of 2017.

This extension comes from the temporary hiatus enacted in 2016 through the end of last year. The tax on medical device sales originated under the Affordable Care Act.

Further investments and attention can be directed to other areas such as capital improvements, employees and research and not be diverted by the imposed tax.

Cadillac TaxUnder the continuing resolution bill, the excise tax on high cost employer-sponsored health coverage, also known as the Cadillac tax, is extended two years. As stated in current law under the Affordable Care Act, the tax was slated to go into effect in 2020, but the new bill signed by the president delays the imposed tax until 2022.

Health Insurance TaxCertain health insurance providers were subject to an annual fee, commonly referred to as the “HIT tax” or the health insurer tax, beginning in 2014 under the Affordable Care Act. The fee was suspended in 2017 and set to go into effect in 2018. Under the new bill, this annual fee is also suspended in 2019; however, it is still applied in 2018.

If you have any questions regarding these extensions and suspensions, please contact your advisor at (805) 963-7811.